Brainard Says U.S. Won’t Give More Funds to IMF for Europe

The Treasury Department’s top
international official reiterated that the U.S. would not be
contributing additional funds to the International Monetary Fund
to help solve the European debt crisis.

“The challenge Europe faces is within the capacity of the
Europeans to manage, and the administration has been clear with
our international partners that we are not seeking additional
funding for the IMF,” Lael Brainard, the Treasury’s
undersecretary for international affairs, said in prepared
remarks to the Senate Banking Committee today.

Brainard said that deterioration in Europe could have “a
material adverse impact” on the U.S. financial system.

Europe’s creditor countries have been pressuring Greek
policy makers ahead of a March 20 bond redemption, when the
country has to make a 14.5 billion-euro ($18.9 billion) payment.
Lender nations are concerned Greece has neither the will nor the
ability to put its finances on a sound footing should it receive
a 130 billion-euro aid package.

“We believe Europe has the will and the capacity to manage
these challenges effectively,” Brainard said. “Nonetheless, if
the euro area were to experience a deterioration of financial
conditions, this could pose important risks to our recovery.”

Brainard praised Italian Prime Minister Mario Monti for
“laying the groundwork for a more dynamic economy” and Spanish
President Mariano Rajoy for addressing Spain’s vulnerabilities
with a “historic restructuring of its financial sector.”

The U.S., as the IMF’s largest shareholder, has a “very
unique ability to influence policies and reforms that are being
undertaken,” in euro countries that have sought an IMF loan,
Brainard said.

Still, the U.S. considers the Washington-based IMF has
enough resources at the moment, she said.

The IMF is seeking $500 billion in additional lending
power. With the U.S. not planning to contribute and euro-region
nations having pledged 150 billion euros ($196 billion), IMF
Managing Director Christine Lagarde has turned to emerging
markets from China to Saudi Arabia to fill the gap.

In January, eight Republican lawmakers sent Treasury
Secretary Timothy F. Geithner a letter to oppose ”American
taxpayer dollars being used to bail out Europe and for Treasury
to confirm that it will not give additional funds to the IMF for
Europe. Republican Senator Bob Corker of Tennessee said at the
hearing that he appreciates the stance Treasury has taken in not
seeking additional funds for the IMF.

”The way you’ve handled the IMF has caused them to have to
focus on Europe solving Europe a little more,” Corker said.